Apache Corporation (NYSE, Nasdaq: APA) today announced that its subsidiary Apache Canada Ltd. has signed a broad agreement with Chevron Canada Limited to build and operate the Kitimat LNG project and develop world-class shale gas resources at the Liard and Horn River basins in British Columbia, Canada.Download (.pdf)

Houston, Dec. 24, 2012 – Apache Corporation (NYSE, Nasdaq: APA) today announced that its subsidiary Apache Canada Ltd. has signed a broad agreement with Chevron Canada Limited to build and operate the Kitimat LNG project and develop world-class shale gas resources at the Liard and Horn River basins in British Columbia, Canada.

Chevron Canada, a subsidiary of Chevron Corp (NYSE: CVX), and Apache Canada each will become a 50 percent owner of the Kitimat LNG plant, the Pacific Trail Pipeline and 644,000 gross undeveloped acres in the Horn River and Liard basins. Chevron Canada will operate the LNG plant, which will be located on the northern British Columbia coast, and the pipeline; Apache Canada will operate the upstream assets.

“This agreement is a milestone for two principal reasons: Chevron is the premier LNG developer in the world today with longstanding relationships in key Asian markets, and the new structure will enable Apache to unlock the tremendous potential at Liard, one of the most prolific shale gas basins in North America,” said G. Steven Farris, Apache’s chairman and chief executive officer.

“With experience developing LNG projects, marketing expertise and financial wherewithal, Chevron is the preferred coventurer to join Kitimat LNG,” Farris said. “Apache has a proven record in finding and developing shale gas resources in Canada and is the logical operator for the upstream elements of the joint venture.

“We are pleased to expand our relationship with Chevron that began with the Wheatstone LNG project now under construction in Western Australia,” Farris said. “Kitimat LNG is the first mover among British Columbia LNG projects, and we expect the momentum of this project will accelerate with this new joint venture.”

Chevron is the operator and led marketing efforts at Wheatstone, a two-train plant with capacity of 8.9 million tons of LNG per annum that is expected to commence operations in 2016. Chevron also operates the Gorgon LNG project in Australia and LNG Angola.

Encana and EOG Resources – currently 30 percent non-operating partners in Kitimat LNG and Pacific Trail Pipeline – will sell their interests to Chevron and exit the venture. As part of the transaction with Chevron, Apache will increase its ownership of the plant and pipeline to 50 percent from 40 percent.Apache, an experienced producer of unconventional oil and gas resources, will operate the new joint venture’s development of 220,000 gross acres in the Horn River Basin and 424,000 gross acres in the Liard Basin. Chevron will purchase a 50 percent interest in undeveloped upstream assets in the Liard Basin from Apache and other Horn River assets from Encana, EOG and Apache.

“At Liard and Horn River, we have built substantial positions in two of the most prolific shale gas plays in North America, with more than 50 trillion cubic feet of resource potential,” Farris said.In June, Apache announced long-term test results from three wells at Liard, including the D-34-K well, which was drilled to a vertical depth of 12,600 feet with a 2,900-foot lateral and a six-stage hydraulic fracturing completion. The 30-day initial production rate averaged 21.3 million cubic feet of gas per day, or 3.6 MMcf per day per frac stage. The ultimate recovery from the D-34-K well is estimated to be 18 billion cubic feet of gas. “We believe this is the most prolific shale gas resource test in the world,” Farris said.

As part of this transaction, Apache will sell to Chevron a 50 percent interest in its 100 percent-owned undeveloped Liard and Horn River acreage for $550 million. Apache will pay Chevron to equalize interests in other Horn River acreage owned by Apache, Encana and EOG. Apache also will pay Chevron to increase Apache’s ownership of the LNG plant and pipeline projects to 50 percent.

Apache’s net proceeds are expected to be approximately $400 million. The transaction, which is subject to certain government approvals, is expected to close in the first quarter of 2013.As is customary in LNG projects, Apache and Chevron will explore sales of equity interests in the plant and upstream assets to foundation customers.

Kitimat LNG, at Bish Cove on the northern British Columbia coast approximately 400 miles (650 km) north of Vancouver, is currently completing front-end engineering and design, and early site work is under way. Current plans call for two liquefaction trains, each with expected capacity of 5 million tons of LNG per annum (about 750 million cubic feet of gas per day). Kitimat has received all significant environmental approvals and a 20-year export license from the Canadian federal government.

The 290-mile (463-km) Pacific Trail Pipeline will provide a direct connection between the Spectra Energy Transmission pipeline system and the Kitimat LNG terminal. The project has strong support from many of the First Nations along the route.

“We want to thank and acknowledge EOG and Encana for their contribution to the development of the Kitimat project,” Farris said. “We appreciate the hard work of many employees and contractors to advance the project to this stage and the strong support the plant and pipeline projects have received from local communities, provincial and federal officials and the Haisla and other First Nations.“Construction of the plant and pipeline will have a significant economic impact, and the operational phase will provide opportunities for employment as well as royalties and tax revenues for the Federal, Provincial and local governments for many years,” he said. “Chevron and Apache will continue to develop this project in a safe and environmentally responsible manner.”

RBC Capital Markets was advisor to Apache, EOG and Encana in the sale preparation of portions of their Horn River Basin holdings.

About ApacheApache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt, the United Kingdom North Sea, Australia and Argentina. Apache posts announcements, operational updates, investor information and copies of all press releases on its website, www.apachecorp.com.

Forward-Looking StatementsThis news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. These include statements about schedules, costs and government approvals of development of the Kitimat LNG project and Pacific Trail Pipelines, LNG marketing activities and future production and exploration prospects in Western Canada. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties which could cause our actual results, performance, and financial condition to differ materially from our expectations. See “Risk Factors” in our 2011 Form 10-K filed with the Securities and Exchange Commission for a discussion of risk factors that affect our business. Any forward-looking statement made by us in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future development or otherwise, except as may be required by law.

Cautionary Note to InvestorsThe United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC's definitions for such terms. Apache uses certain terms in this release, such as “resource potential,” “resource,” and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and amendments thereto, available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov.